You’ve made it through the tough part. You were able to get beyond the planning stages and open the doors, either virtual or real, to your business. Your expectations are such that you don’t believe you’ll make a profit in your first year of business and although that may be true, that doesn’t mean that you can be lax on your business records.
In fact, the opposite is true. If you’re going to claim a loss on your taxes, having detailed documentation of the deductions is key to avoiding an IRS audit especially if you claim the home office or any of the other lucrative deductions. Here are a few records you should keep up to date at all times.
Every expense you incur as well as every dollar you make should be accounted for. This means finding a software package that can help keep track of client accounts, vendor transactions, and other related transactions. You’ll need to keep copies of bank records, cancelled checks, receipts, and even deposit slips. If you’re using a program like QuickBooks, regularly back up your data file just in case something happens. You could also consider using QuickBooks online. This gives you further confidence that your data is safe.
Anything related to the structure of your company should be kept in a safe place and also backed up. This could include articles of incorporation, a copy of your EIN and proof that you are an LLC or other business structure and bylaws. If your corporation is more complex, stock certificates and options and warrants.
Regardless of how old, always hold on to your old contracts. This would include equipment leases, lease documents related to the office or retail space you’re operating, faxes, e-mails, and other important contracts.
This might include completed employee applications, contracts or offer letters, handbooks, and personnel records including evaluations, attendance, W-2s, and termination letters if applicable.
What do you own? If you own the patent to any of your products, keep this paperwork in a secure location. You should also scan it and keep the file in a safe location. This would also include patent applications and any other correspondence related to intellectual property.
Anything that seems remotely important should be saved. That’s not only good advice for the first year, but for years to come. Proper and complete documentation is key to winning lawsuits and escaping audits without a penalty.